This was an unprecedented year in many ways. While 2020 has taught us the importance of quick and reactive policy-making, most of all it has shown how proactive legislative activities can better prepare our societies for the future, be it pandemic preparedness, technological innovation or future financial stability. With regard to the COVID-19 pandemic, this is undoubtedly correct. However, the same applies to the blockchain industry.
The writing is, so to speak, on the wall. We're closing this tumultuous year with far more attention now being paid to distributed ledger technology (DLT) and crypto assets than it was this time last year – and for good reason. Regulators have largely begun to proactively prepare for the future of this burgeoning technology, realizing its incredible potential and inevitable future, which includes the mass adoption of blockchain technology.
This post is part of CoinDesk's 2020 Year in Review – a collection of posts, essays, and interviews about the year in Crypto and beyond. Albert Isola, MP, is Gibraltar's Minister for Digital and Financial Services.
But have regulators done enough this year?
For the first time this year, important regulatory proposals from international institutions such as the European Commission were published with the publication of their regulatory proposals on markets for crypto assets (MiCA). The importance of this cannot be emphasized enough. The willingness of this legislative coalition of 27 member states to publish these extensive legislative proposals shows how seriously they are now taking blockchain and crypto assets.
Gone are the days of paying lip service to DLT regulation and sitting on the sidelines – regulators have finally realized the game has already begun. If you want to keep up, your best bet is to start playing.
The MiCA proposals ensure that the European Union's financial sector maintains a high level of competitiveness and enables access to and encouragement of innovations in the blockchain and crypto-asset industries.
Signaling a hug from DLT will no doubt have a positive impact on institutional adoption. Especially since the past lack of regulation in this area has hampered the institutions' appetite to get involved in the industry. The reference to a regulation request can only be assessed as massively positive by those already involved.
This year in Gibraltar we had the pleasure of joining the International Association for Trusted Blockchain Applications (INATBA), a group of international players in the blockchain industry. became an observing member of the Global Blockchain Business Council (GBBC), the leading industry association for the blockchain technology industry; We have recently joined the UK Chamber of Commerce for the EU and Belgium.
Gone are the days when lip service was given to DLT regulation and sat on the sidelines.
All of these efforts, in addition to updating our Distributed Ledger Guides to align with the Financial Action Task Force (FATF) VASP rules, will further our open attitude to distributed ledger technology and our efforts to secure the space regulated while promoting innovation and protecting the consumer.
Outside the EU, positive regulatory progress has been made in various regions. In September, Switzerland presented its changes in finance and corporate law, which duly recognize and facilitate the regulation of the blockchain and crypto industry. The so-called “Blockchain Act” will take the blockchain and cryptocurrency industry into the mainstream and open the doors to this innovative technology for the Swiss economy.
In the United States, the Conference of State Bank Supervisors, which is made up of regulators from all 50 states, introduced a uniform regulatory framework for payment and cryptocurrency companies in September. This framework will be of great help to companies looking to be in or already operating in the US to expand beyond all 50, while also greatly reducing the cost of regulatory compliance for regulators, which is already an amazing hassle.
The regulatory efforts by the European Commission, Switzerland and the US are major advances that should be praised by the industry as a whole, although they are not alone. There are dozens of regulators actively working towards comprehensive DLT regulations from Austria to Japan.
See also: Gibraltar updates distributed ledger guidelines to comply with FATF crypto rules
After several stagnant years in DLT regulation, regulatory efforts in space are now becoming almost as popular as the cryptocurrencies themselves. The focus that regulators are now putting on the industry is a significant positive development, although these bodies should be encouraged to use working together in the industry, not against it.
Was 2020 a step backwards or sideways in terms of DLT regulation? Neither. It was a big leap forward. There is still a long way to go, however. These regulatory efforts need to be carried out to completion, with everyone involved having a seat at the table, not only to create the necessary regulatory framework, but also to ensure that the innovation that the space is known for is not hindered but encouraged.
Year in Review is a collection of posts, essays, and interviews about the year in Crypto and beyond.